HK traders still adapting to Stock Connect

HONG KONG: Hong Kong stock traders are still adapting to Stock Connect, the cross-border investment channel that links the exchanges of mainland China and Hong Kong.

Shenwan Hongyuan Capital (HK) Ltd managing director and head of corporate finance Willis Ting said while the link between the Hong Kong stock exchange (HKEx) and China’s Shenzhen and Shanghai stock exchanges has spelled good for the finance industry, it has led to much need for adaptability on the part of the Hong Kong traders.

“It is good for the finance industry but we have to adapt to the Chinese mentality in terms of corporate governance and the way they invest,” he told SunBiz at a dinner hosted by PRG Holdings Bhd in conjunction with the listing of its 75%-owned manufacturing arm Furniweb Holdings Ltd on the Hong Kong stock exchange last week.

Ting said the investment channel, which has been seeing funds flowing both ways, is a new experience that Hong Kong investors are still learning about and adapting to.

The link between the Shanghai Stock Exchange and HKEx was established in 2014, and was extended in December 2016 to include the Shenzhen exchange.

Adding on, Shenwan’s director of corporate finance, Sunny Chan, said the link has enabled more Chinese investors to trade Hong Kong stocks in a more “formal” way through these “government-approved channels”, as well as curbing concerns over illegal stock trades, which he said occurred in the past.

With this equity trading links, mainland Chinese companies with establishments in Hong Kong or mainland Chinese people are able to set up trading accounts with stockbrokers in Hong Kong and start trading.

It was recently reported that the HKEX is mulling plans for investors declare and register their identities in order to trade on Stock Connect, which will then be exchanged with its Chinese counterparts in a bid to prevent the capital market from being a hub for malpractices such a money laundering. The regulation is expected to come into play next year.

Turnover on the Shanghai-Hong Kong link on Oct 20 was HK$6.07 billion (RM3.28 billion), and HK$2.74 billion (RM1.48 billion) on the Shenzhen-Hong Kong link.